Real estate investing is a challenging business. Advertising claims and get-rich-quick schemes may have led you to believe that investing in real estate is very easy and you could get your money back right away. The truth is, it is neither easy nor quick. But it has been shown again and again that it is a reliable pathway to wealth— an inflation-proof way to grow retirement and other accounts. Becoming a successful real estate investor requires a certain amount of experience, knowledge, planning, and skill. This being the case, it is really important that you ask yourself these six important questions before jumping in.
1. How much do you know about the real estate industry, market, terminology, and so on?
It’s critical to have the skill to spot a good deal on a property, but successful real estate investing requires knowing more than that. If you have plans to invest, then you’ll need an excellent grasp of what drives markets, changes to laws and regulations, current trends, and warning signs to watch out for, etc. If your knowledge about real estate investing is lacking, then it’s a good idea to learn all you can about it first. When you have a good handle on it, you can then start your journey by buying your first rental property. The internet offers so much wealth of information and resources for new investors. There are sites like BiggerPockets.com that can get you started. Also available are dozens of how-to books, articles, and videos.
2. What kind of financial skills do you have?
Investing in real estate is different from investing in stocks or other securities. There is a financial skillset and lingo being used in the industry that sets it apart from other industries, and successful investors need this so they can get the best deals. Case in point, someone investing in rental properties needs to know how to analyze a potential property for cash flow, estimate repair and maintenance costs, calculate anticipated rental rates based on current market conditions, the amount of your expected return (both long- and short-term), and more. Now, if you haven’t mastered the terms and ideas in real estate financing yet, do think about expanding your education. It will really be a great help.
3. Do you have a clear vision for your real estate investing business?
If you own a rental property, you are in the investing business. And just like any other business, yours will benefit from having a specific set of goals and a detailed plan of how you intend to achieve them. If you haven’t written a business plan yet, create one that will help you articulate the big picture and iron out any wrinkles you may encounter. It’s also good to have an exit plan even though you don’t need it yet. It’s important to stay prepared. The truth is, real estate investing isn’t just about finding great deals and buying in; it’s also about knowing the proper way and timing to get out.
4. How comfortable are you with risk?
All investments carry some degree of risk. It’s no different with real estate. Although the risks in real estate investing are different from other types of investments, there will still be some issues you’ll need to address. Thank goodness that there are opportunities to mitigate the inherent risks when you decide in advance what kind of real estate investor you want to be. One strategy that rental property owners employ is to develop a niche, purchasing similar properties. It’s a good move especially if you think about how their experience gives them a deep understanding of one particular kind of investment property. If you can tolerate high risk for that huge reward, then you may want to gamble a bit more on higher-priced properties, or those in high-rent areas. For investors that are more averse to risk and want to go the safer route, less expensive rentals in stable neighborhoods might be the better option.
5. How strong are your interpersonal skills? Can you work well with others?
The essence of real estate investing is that it is a business that relies on relationships with other people. As a real estate investor, expect a large team of real estate, mortgage, and home remodeling professionals to be working with you. Therefore, one of the keys to investing success is assembling a great team. This involves finding people who understand how you communicate and who have a relationship with you that is built on honesty and respect. If you observe successful real estate investors, you can see that they leverage their trust in other people to help them complete the many tasks that real estate investing requires. This allows them to accomplish a lot more with the least amount of time. They also engage in networking opportunities and trade referrals as a way to solidify and build mutually beneficial business relationships with others.
6. Who is going to manage the property?
The way it’s been normally done before is that real estate investors were owner-landlords. The vast majority of them were people who invested in and then managed their own rental properties. That was in the past, but now the trend has changed. This is mostly due to the fact that this approach tends to limit your investing potential to a small geographical area. It has to be in a location near to where you live. Using today’s real estate platforms and with the rise of national property management companies such as Real Property Management Brevard, investors can buy rental properties just about anywhere. You are now free to go wherever the deals are best since there are nearly 300 quality property management offices nationwide. All these offices are ready to serve you— to care for and lease your rental properties.
To achieve success as a real estate investor, you’ll need access to the best available information, experts, and tools. Which is why Real Property Management Brevard offers a free rental property assessment to investors looking for their first investment property. To avail of this valuable free service, contact us or call us at 321-610-8022.
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